It’s a tough business running a European retail energy business, margins are tight, competition is fierce and politicians love to bash your business to curry favour with consumers. If it’s bad now, it could be set to get a lot worse out to 2025 as Blockchain technology destroys the margins & revenues of European retail energy businesses.
The dilemma facing CEOs, boards & investors in European energy businesses is that your retail business is set to be destroyed, whilst fast movers can grab a large slice of an expected €22 billion of annual revenues across Europe by 2025.
Blockchain will kill the ‘middle man’ across Europe
Retail energy companies are essentially just the ‘middle man’ between the retail consumer and the electricity generators. Blockchains, and specifically ‘Smart Contracts’, have the ability to render this relationship as unnecessary.
In the new world consumers and generators will be in direct contact. Virtually all the functions of today’s retail energy suppliers can be carried out completely automated by ‘Smart Contracts’.[Diagram source from Berenburg Bank investment bank paper (Utilities – The smart home opportunity 2 June 2017)]
There’s still time to react for Retail businesses before the Blockchain Tsunami lands
There are still some barriers to entry that will slow adoption beyond the 5-10% of ‘early adopters’ that give retail utility firms some time to react. Blockchains are a new concept, smart meter rollout is not fully progressed in each European market, ‘smart grids’ are at an experimental stage, legal & regulatory barriers need to be overcome (Brexit may be a help or a hindrance for the UK in terms of regulatory delay).
Blockchains can eliminate virtually all the complexity for consumers
Blockchains can take the worry, time & effort for consumers by doing all the complex admin & processes completely automatically. This would allow cost conscious or environmentalist consumers to rest easy as Blockchain ‘Smart Contracts’ source and supply ‘Green energy’ at the lowest price without any human intervention. The key components are already here and working (see below).
The Future is Here sooner than you might think
The leading Blockchains (Bitcoin, Ethereum and Ripple) are already handling billions of dollars of financial transactions per day in aggregate already. In Austria, Wien Energie is trialling energy trading through Blockchain. In New York, the Brooklyn ‘MicroGrid’ is enabling peer-to-peer energy trading and supply between ordinary householders, Israeli startup StoreDot have demonstrated their ‘FlashBattery’ (that they claim can charge an Electric Vehicle within 5 minutes to be able to then drive 300 miles
A chance for ‘fast movers’ to grab a large slice of €22 billion annual revenues
It’s not all doom & gloom for those Utilities that can move fast to grab a large slice of an estimated €22 billion of revenues for ‘connected home’ services across the EU by 2025 (source: Berenburg Investment Bank – ‘Utilities – The Smart Home Opportunity’).
So the smarter energy/ utility firms have the opportunity to move away from their old business model set to go bust towards new much more profitable business models .. if Google, Amazon & Apple don’t beat them to it…
WATCH THIS SPACE!